A U.S.-based MNC has three subsidiaries: S1 (40 percent owned by the MNC); S2 (33 percent owned by S1), and S3 (20 percent owned by S2). The taxable income for each firm is $100 million. The local taxes for each firm are $15 million, $20 million, and $10 million, respectively. The MNC's tax rate is 40 percent.

Can the MNC apply all of its local taxes as a credit against its U.S. taxes?  If not, which subsidiaries can it use to get a credit against its U.S. taxes.  Explain your rationale briefly.

Based on the "grossing up" concept, calculate all tax credits applicable to the MNC.